Island Nation Grapples With Legacy of Crisis Amid IMF Pressure
As Sri Lanka enters 2025 under its coalition government led by President Anura Kumara Dissanayake, public frustration mounts over stalled economic reforms and controversial austerity measures tied to its $3 billion IMF bailout program. New data reveals 42% of families still face food insecurity – barely improved from crisis peaks in 2022.
The Ghost of 2022’s Collapse
The current turmoil traces directly to 2022’s unprecedented economic collapse when:
- Foreign reserves dropped to $50 million – enough for 3 days of imports
- Inflation hit 54.6% with 12-hour daily power cuts
- Mass protests ousted President Gotabaya Rajapaksa after storming his residence
Reform Roadblocks
Despite securing IMF support in 2023, key challenges persist:
| Challenge | Current Status |
|---|---|
| Public Debt | 103% of GDP ($84B) after 2022 default |
| Tourism Recovery | 68% of pre-2019 levels |
| Fuel Prices | Up 320% since 2021 |
“The government is trying to please both IMF creditors and a traumatized population – this balancing act satisfies neither,” says Colombo-based economist Ravi Ratnasabapathy.
Geopolitical Tightrope
With China holding 52% of bilateral debt and India/US pushing strategic interests, Sri Lanka struggles to maintain non-aligned status. Recent moves to increase rupee trade with Iran and Russia show attempts at monetary independence.
What Comes Next?
Key factors to watch:
- March 2025 IMF review of tax reforms
- Monsoon impact on crucial rice harvests
- $1B renewable energy deals with Indian firms
